Research Briefing

As “Recovery Summer” Winds Down, More Bad Signs For Obama’s Economy

“RECOVERY SUMMER” ENDING WITH A WIMPER AS UNDEREMPLOYMENT ROSE AND THE AUTO INDUSTRY SAW ITS WORSE MONTH SINCE 1983

According To A Recent Gallup Poll, Underemployment Was At 18.6 Percent In August, Up From 18.4 Percent In July. “Underemployment, as measured by Gallup, was 18.6% in August, up from 18.4% at the end of July. Underemployment peaked at 20.4% in April and has yet to break below 18.3% this year. Gallup's underemployment measure estimates the percentages of American workers who are either unemployed or working part time but wanting full-time work. It is based on more than 15,000 phone interviews with U.S. adults aged 18 and older in the workforce, collected over a rolling 30-day period and reported daily and weekly. Gallup's results are not seasonally adjusted and tend to be a precursor of government reports by approximately two weeks.” (Dennis Jacobe, “U.S. Underemployment At 18.6% In August,” Gallup, 9/2/10)

“U.S. Private-Sector Employment Fell 10,000 In August, According To The ADP Employment Report Released Wednesday, Breaking A Six-Month Run Of Increases.”  (Ruth Mantell, “ADP Says Private-Sector Employment Fell 10,000 In August,” MarketWatch, 9/1/10)

• “‘The Decline In Private Employment In August Confirms A Pause In The Recovery Already Evident In Other Economic Data,’ Said Joel Prakken, Chairman Of Macroeconomic Advisers, Which Produces The Report From Anonymous Payroll Data Supplied By ADP, In A Statement.”  (Ruth Mantell, “ADP Says Private-Sector Employment Fell 10,000 In August,” MarketWatch, 9/1/10)

Economists Worry About A “Weakening Labor Market” With One Economist Saying A “Revival In Payrolls Is Clearly Still Some Way [Off].” “Economists are concerned about a weakening labor market. ‘Demand growth has slowed, largely triggered by the spring plunge in stock prices, and cautious companies are responding by holding fire on hiring,’ wrote Ian Shepherdson, chief U.S. economist with High Frequency Economics, in a research note. "We do not expect a spiral down into sustained serious net job losses but a real revival in payrolls is clearly still some way [off].’” (Ruth Mantell, “ADP Says Private-Sector Employment Fell 10,000 In August,” MarketWatch, 9/1/10)

In Their August Meeting, “Several Fed Officials Argued That Business Was Frozen By Uncertainty About Taxes, Regulations And Health-Care Costs.” “Federal Reserve officials wrestled with a slew of questions about the disappointing recovery before deciding at a fractious Aug. 10 meeting to prevent their securities portfolio from shrinking, according to minutes released Tuesday. High unemployment was one issue. Several Fed officials argued that business was frozen by uncertainty about taxes, regulations and health- care costs.” (John Hilsenrath, “Fed Wrestled With Questions, Doubts,” The Wall Street Journal, 9/1/10)

• Fed Officials Concluded That The Economy Would Grow Slower Than Expected Through 2011. “Officials concluded the U.S. ‘was operating farther below its potential than they had thought, that the pace of recovery had slowed in recent months and that growth would be more modest during the second half of 2010 than they had anticipated.’ Fed staff lowered the projection for 2010 growth but largely stuck to its call for a ‘moderate strengthening’ in growth in 2011.” (John Hilsenrath, “Fed Wrestled With Questions, Doubts,” The Wall Street Journal, 9/1/10)

Declining Economy Kept Buyers Out Of Auto Showrooms And Drove Sales To The Lowest Levels Since 1983. “Americans nervous about the drumbeat of bad economic news stayed away from auto showrooms. Automakers nervous about their bottom lines didn't offer deals to lure them in. As a result, it was the worst August for U.S. auto sales since 1983, when the country was at the end of a double-dip recession. General Motors, Toyota, Honda and Ford all reported declines from the month before and from a year earlier.” (Dee-Ann Durbin and Tom Krishner, “Weak Auto Sales For August Amid Economic Worries,” The Associated Press, 9/1/10)

• “‘Coming In Below A Million Units Is Eye-Opening For August,’ Said Paul Ballew, A Former Chief Economist For GM. ‘I Never Thought I'd See That. That's A Tepid Month For August, Which Is Supposed To Be One Of The Top Months Of The Year.’” (Dee-Ann Durbin and Tom Krishner, “Weak Auto Sales For August Amid Economic Worries,” The Associated Press, 9/1/10)

73 Percent Of Americans Report That They Have Been Effected By The Recession’s Wave Of Unemployment. “Nearly three out of four Americans have been directly affected by the recession, either because they have been unemployed or know someone who has lost their job, according to a new survey. The report, prepared by Rutgers professors Carl Van Horn and Cliff Zukin, find that 73% of Americans have either been unemployed themselves (14%) or saw an immediate family member (12%), another member of their family (30%) or a close friend (17%) lose a job.” (Mark Blumenthal, “POLL: Unemployment Affects Three Out Of Four Americans,” The Huffington Post, 9/1/10)

• Americans Are Expressing A “Profound Pessimism” And Belief That The Economy Will Be The Same Or Worse In A Year. “The survey also finds profound pessimism about where the economy is headed. More than half of Americans say they believe the downturn reflects a "lasting economic change" (56%) rather than a ‘temporary economic downturn’ (43%). Large majorities believe that the economy will remain in recession or worse a year from now.” (Mark Blumenthal, “POLL: Unemployment Affects Three Out Of Four Americans,” The Huffington Post, 9/1/10)
• “‘After Suffering Through The Worst Economic Disaster Most Have Ever Experienced,’ Van Horn Said In A Statement, ‘American Workers Have Diminished Expectations About America's Economic Future And Do Not Have Much Faith That The Nation's Political Leaders Can Move The Country Forward.’” (Mark Blumenthal, “POLL: Unemployment Affects Three Out Of Four Americans,” The Huffington Post, 9/1/10)
• Moody’s Chief Economist, Mark Zandi Says Infrastructure Spending In Stimulus Was Not “Particularly Helpful.” “Zandi called it a mistake to put infrastructure spending into the stimulus bill. ‘It's good policy and we can use the jobs, but it's not an effective way of getting money into the economy quickly,’ he said. Nor was spending on Obama priorities such as education and broadband ‘particularly helpful’ in putting money into the economy fast, he told me.” (Jill Lawerence, “Stimulus Plan in Hindsight: Did Obama's Agenda Hobble Economic Recovery?,” Politics Daily, 9/2/10)